Chapter 3
E-Commerce: Digital
Markets, Digital Goods
10.1
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• E-commerce
• Use of the Internet and Web to transact business
• Digitally enabled transactions
• History of e-commerce
• Began in 1995 and grew exponentially; still growing at an
annual rate of 16 percent
• Rapid growth led to market bubble
• While many companies failed, many survived with soaring
revenues
• E-commerce today the fastest growing form of retail trade in
U.S., Europe, Asia
10.2
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
The Growth of E-Commerce
Retail e-commerce revenues have grown
exponentially since 1995 and have only recently
“slowed” to a very rapid 16 percent annual
increase, which is projected to remain the same
until 2010.
10.3
Figure 10-1
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Eight unique features of e-commerce technology
1. Ubiquity
• Internet/Web technology available everywhere: work, home,
etc., and anytime
2. Global reach
• The technology reaches across national boundaries, around
Earth
3. Universal standards
• One set of technology standards: Internet standards
4. Richness
• Supports video, audio, and text messages
10.4
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Eight unique features (cont.)
5. Interactivity
• The technology works through interaction with the user
6. Information density
• Vast increases in information density—the total amount and
quality of information available to all market participants
7. Personalization/Customization:
• Technology permits modification of messages, goods
8. Social technology
• The technology promotes user content generation and social
networking
10.5
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Key concepts in e-commerce
• Digital markets reduce
• Information asymmetry
• Search costs
• Transaction costs
• Menu costs
• Digital markets enable
• Price discrimination
• Dynamic pricing
• Disintermediation
10.6
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
The Benefits of Disintermediation to the Consumer
The typical distribution channel has several intermediary layers, each of which adds to the final
cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.
Figure 10-2
10.7
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Key concepts in e-commerce (cont.)
• Digital goods
• Goods that can be delivered over a digital network
• E.g., Music tracks, video, software, newspapers, books
• Cost of producing first unit almost entire cost of product:
marginal cost of producing 2nd unit is about zero
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly variable
• Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
10.8
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Internet business models
• Pure-play models
• Clicks-and-mortar models
• Social Network
•
Online meeting place
•
Social shopping sites
•
Can provide ways for corporate clients to target customers through
banner ads and pop-up ads
• Online marketplace:
• Provides a digital environment where buyers and sellers can
meet, search for products, display products, and establish prices
for those products
10.9
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Content provider
• Providing digital content, such as digital news, music, photos,
or video, over the Web
• Online syndicators: Aggregate content from multiple sources,
package for distribution, and resell to third-party Web sites
• Service provider
• Provides Web 2.0 applications such as photo sharing and
interactive maps, and services such as data storage
• Portal
• “Supersite” that provides comprehensive entry point for huge
array of resources and services on the Internet
10.10
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
• Virtual storefront:
• Sells physical products directly to consumers or to
individual businesses
• Information broker:
• Provides product, pricing, and availability information to
individuals and businesses
• Transaction broker:
• Saves users money and time by processing online sales
transactions and generating a fee for each transaction
10.11
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Types of Electronic Commerce
• Business-to-consumer (B2C)
• Business-to-business (B2B)
• Consumer-to-consumer (C2C)
• Mobile commerce (m-commerce)
10.12
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
• Types of electronic payment systems
• Digital wallet
• Stores credit card and owner identification information and
enters the shopper’s name, credit card number, and
shipping information automatically when invoked to
complete a purchase
• Accumulated balance digital payment systems
• Used for micropayments ($10 or less)
• Accumulating debit balance that is paid periodically on credit
card or telephone bills
10.13
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
• Stored value payment systems
• Enable online payments based on value stored in online
digital account
• May be merchant platforms or peer-to-peer (PayPal)
• Digital checking
• Extend functionality of existing checking accounts to be used
for online payments
• Electronic billing presentment and payment
systems
• Paying monthly bills through electronic fund transfers or credit
cards
10.14
© 2010 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
• Digital payments systems for m-commerce
• Three types of mobile payment systems in
use in Japan
• Stored value system charged by credit cards or
bank accounts
• Mobile debit cards
• Mobile credit cards
• In the U.S., the cell phone has not yet
evolved into a mobile payment system
10.15
© 2010 by Prentice Hall
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Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
10.16
© 2010 by Prentice Hall